Morning Report: New Home Sales rise

Vital Statistics:

S&P futures3,6654.25
Oil (WTI)79.591.07
10 year government bond yield 3.82%
30 year fixed rate mortgage 6.79%

Stocks are flattish this morning after US Treasury yields hit 3.94% overnight. Bonds and MBS are up.

Treasury yields spiked overnight on speculation that the Bank of Japan would intervene to support the yen by selling Treasuries. Regardless, global yields have been on a tear, with the German Bund now yielding 2.15%. Just over six months ago, the yield on the Bund was negative.

New Home Sales rose 29% MOM to a seasonally-adjusted annual pace of 685,000. This was flat YOY. I don’t think this means much in of itself – the standard errors for new home sales estimate are typically huge. I wouldn’t be surprised to see this one revised downward in coming months.

Consumer confidence improved in August, according to the Conference Board. These consumer confidence numbers are highly correlated with gasoline prices, however there is some good news about inflationary expectations.

“Consumer confidence improved in September for the second consecutive month supported in particular by jobs, wages, and declining gas prices,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index rose again, after declining from April through July. The Expectations Index also improved from summer lows, but recession risks nonetheless persist. Concerns about inflation dissipated further in September—prompted largely by declining prices at the gas pump—and are now at their lowest level since the start of the year.”

Mortgage applications fell 3.7% last week as purchases fell 0.4% and refis fell 11%. The refi index is 84% lower than it was a year ago. “Applications for both purchase and refinances declined last week as mortgage rates continued to increase to multi-year highs following more aggressive policy measures from the Federal Reserve to bring down inflation,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Additionally, ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates.”

The part about uncertainty is important. The Fed was relying on runoff to allow its portfolio of MBS to shrink. With refinances out of the picture, normal purchase activity will have to do the job. Which means the Fed might be pushed to sell some of its portfolio directly into the market. Jerome Powell was asked about that in his press conference following the September FOMC meeting. He basically said that this is nothing they are considering right now.

Speaking about mortgage backed securities, the mortgage REITs have been absolutely pummeled over the past week. AGNC Investment, which buys almost entirely agency securities is down 17% over the past 5 days. Annaly, which just did a reverse stock split is down by 16%. I am wondering if we are seeing margin calls again in the space. The stocks sure are acting like it.

Pending Home Sales slipped 2% in August and are down 24% on a YOY basis. “The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist Lawrence Yun. “If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.”

40 Responses

  1. Totally.

    Then, when you get Covid be sure you say the liturgy.


  2. I am hoping there is more to this story than is being reported.

    If there isn’t, then it seems to me the DOJ and FBI have been politicized and weaponized against D political opponents even beyond what I have already assumed.


    • 20 armed FBI officers. For pushing an abortion activist.

      There is no other sane interpretation except that the Party wants to criminalize disagreement with its politics.


      • Brent:

        There is no other sane interpretation except that the Party wants to criminalize disagreement with its politics.

        Exactly. That is why I am hoping that there is more to the story. The reaction seems completely insane, but to be honest I can’t even come up with any wild speculation that might justify it.


      • The FBI version:

        “A spokesperson with the Philadelphia office of the FBI pushed back against the SWAT team claim, telling Fox News Digital: “There are inaccurate claims being made regarding the arrest of Mark Houck. No SWAT Team or SWAT operators were involved. FBI agents knocked on Mr. Houck’s front door, identified themselves as FBI agents and asked him to exit the residence. He did so and was taken into custody without incident pursuant to an indictment.”

        A senior FBI source told Fox News there may have been 15-20 agents at the scene, but denied 25 were there. The agents who came to the door had guns out and at the ready, according to this FBI source, but the guns were never pointed at Houck or his family and were lowered or holstered as soon as Houck was taken into custody.

        Houck was handcuffed with a belly chain, according to a senior federal law official familiar with the situation. In this process, the suspect’s handcuffs are attached to a chain around the belly so the person doesn’t have to sit in a car with handcuffs behind his back.

        In addition, a senior federal law enforcement source denied that agents entered the house.”

        Still excessive either way, and even more so that they did this over an incident from Oct. 13, 2021.


        • I don’t believe what their saying. I think they went in full tactical gear and screamed like maniacs at everyone the whole time. I also guarantee they cuffed him, including leg irons, in front of his family.


        • I don’t believe what their saying

          I don’t either. It is kind of sad that the guy who ran over and killed a kid for being conservative was let go, and this happened to a guy who merely pushed (no talk of injuries so i am assuming nothing other than wounded pride) some abortion activist.

          Our security state has gone native.


        • jnc:

          Still excessive either way, and even more so that they did this over an incident from Oct. 13, 2021.

          Yeah, nothing in that contradicts the substance of what has already been reported. Could only have been deliberately excessive, to send a message. And that message is disturbing.


        • Tucker on it tonight:


  3. I sure hope it wasn’t the US that blew-up the Nordstream pipelines. If we did it opens us up to all sorts of mischief.


  4. A tale of two conversions. Scott Adams really was right about watching two different movies:

    “The Myth that MAGA is Driven by “White Rage
    Sep 27 • 44M
    Sasha Stone”

    “Republicans Won’t Abandon Trump
    By Chris Ladd
    September 24, 2022”


  5. He always puts up the Wilson pic whenever there’s a Biden episode and it never fails to make me ponder.


  6. Some interesting thoughts here I think.

    Taking another materialist view, Richard Pildes, a constitutional law scholar at New York University School of Law, attributes the rise of illiberal forces to the dispersal of political power among a growing number of political parties, which he argues limits the ability of democratic governments to function effectively. “When democratic governments seem incapable of delivering on their promises, this failure can lead to alienation, resignation, distrust and withdrawal among many citizens,” he wrote in The Times last year. “It can also trigger demands for authoritarian leaders who promise to cut through messy politics. At an even greater extreme, it can lead people to question democracy itself and become open to anti-democratic systems of government.”


  7. Thank goodness these Mensa members are in charge of shit!

    Such a relief to know we’re in their hands!


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